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Excluding liability: has the pendulum swung?

We look at the scope for professional consultants to exclude or limit liability in the terms of their appointment.

It is not uncommon for professional consultants to seek to limit or provide for exclusions to their liability in the terms of their appointment.

In the recent case of Persimmon Homes v Ove Arup & Partners, the Technology and Construction Court considered whether a widely drafted exclusion clause was sufficient to exclude the consultant's liability for claims arising out of asbestos and, if so, whether it would supersede previous agreements between the parties or be incorporated within them.

THE FACTS

Arup advised Persimmon before and during the purchase of a site in South Wales. Arup was engaged under a number of documents, including an exchange of emails and a letter of intent (both from 2007) and a formal agreement in 2009. Following the purchase, asbestos was discovered and Persimmon claimed damages from Arup, alleging breach of contract and negligence. Arup sought to rely on a clause in the 2009 agreement which provided that liability for any claim in relation to asbestos was excluded.

THE DECISION

Persimmon argued that the clause was not effective because it was ambiguous, that it is a well-established legal principle that clear words are required to exclude liability and that such limitations should be interpreted against the party seeking to rely on them. The Court disagreed. There was no ambiguity. In circumstances where the parties were commercial entities of equal bargaining power, the Court held that it should be very slow to disturb the contracts of businessmen who are capable of looking after their own interests.

The Court also found that the 2009 agreement did not govern the earlier agreements, meaning that the exclusion clause could only apply to services carried out under the 2009 agreement. However, on the facts, the asbestos could only have been discovered as part of the 2009 services and therefore the exclusion clause applied.

COMMENT

The Court's decision is indicative of a recent shift away from the traditionally restrictive approach English law has taken towards limitations on liability. In this case it is difficult to see how the parties' intention could sensibly have been anything other than to exclude Arup's liability for asbestos.

Developers need to take care in reviewing clauses which seek to limit liability and to ensure that there is clear agreement on terms before works commence. Absent clear drafting, a subsequent agreement may not automatically supersede an exchange of correspondence.